Malaysian central bank fines 1MDB

A construction worker working in front of a 1MDB billboard at the Tun Razak Exchange development in Kuala Lumpur, Malaysia on Feb 3, 2016.
A construction worker working in front of a 1MDB billboard at the Tun Razak Exchange development in Kuala Lumpur, Malaysia on Feb 3, 2016.PHOTO: REUTERS

1Malaysia Development Bhd (1MDB) was slapped with a fine by the central bank for failing to comply with Bank Negara Malaysia's (BNM) directives, the first concrete action against the troubled state fund by one of the country's investigative authorities probing the fund's affairs.

The fund, wholly owned by the Finance Ministry, has until May 30 to pay the fine, the central bank said in a statement yesterday, without mentioning an amount.

Under the Financial Services Act 2013, failure to comply with the central bank's directive would incur a prison term not exceeding 10 years, or a fine not exceeding RM50 million (S$17 million), or both. "The payment of the compound marks the conclusion of the investigation by BNM on the contraventions to the rules and regulations of the Central Bank," the statement read.

BNM ordered 1MDB to repatriate a sum of US$1.83 billion (S$2.46 billion) from abroad after it revoked permission for three fund transfers earmarked for investments. 1MDB had replied that the funds were already utilised in investments and it was thus unable to comply with the directive.

The central bank said that 1MDB also failed to submit documentation proof required to justify its inability to repatriate the funds.

In response to the fine, 1MDB said it "fully respects the authority and decision of BNM" and that it would pay the fine.

In October last year, the Attorney-General's Chambers revealed that BNM had investigated 1MDB in August for making false statements - a criminal offence that carries a jail term upon conviction. However, the prosecutor found no wrongdoing on 1MDB's part and directed that no further action be taken. The central bank then requested the prosecutor's office to review its decision, but failed.

The only option left for BNM, it said, was to pursue the matter through "administrative action". BNM governor Zeti Akhtar Aziz, who retires tomorrow, had said she intends to complete the central bank's probe into 1MDB during her tenure, passing on a clean slate to successor Muhammad Ibrahim.

In response to the fine, 1MDB said it "fully respects the authority and decision of BNM" and that it would pay the fine.

A version of this article appeared in the print edition of The Straits Times on April 29, 2016, with the headline 'Malaysian central bank fines 1MDB'. Print Edition | Subscribe